I. WHAT LAW APPLIES? UCC Article 2 governs contracts for the sale of goods.

Common law (Restatements) governs any K not governed by UCC (e.g. service); Test for sale of goods vs. sale of services: Maj. Rule: Predominant factor test (i.e. purpose), Min. Rule: Severe K into d ifferent parts. II. IS THERE A VALID K? K Defined (2-106 sale of goods and R1). K Formation (2-204, terms may be left open), bargain & manifestation of mutual assent (R17-19, 23), offer and acceptance (R22). (1) Offer (2-206): R24 An offer is the manifestation of willingness to enter into a bargain, so made as to justify another person in understanding that his assent to that bargain is invited and will conclude it. Preliminary Negotiation (R26); Good faith imposed on all Ks (R205); Seals Inoperative (2-203). (a) Is there a valid offer? Manifestation of a present intent to K demonstrated by a promise, undertaking, or commitment; Communicated to an identified offeree; Definite and certain terms (b) Has the offer been terminated? Offer gives offeree power of acceptance unless terminated (R35); Methods of termination (R36): rejection (R38) or counter-offer (R39) by the offeree, lapse of time (R41, specified, if not spec., then reasonable time), revocation by the offeror (R42, 43), or death or incapacity (R48) of the offeror or offeree; Irrevocable offer: Merchants firm offer (2-205, 2-104 for definition): signed writing, left open for specified time, or if not, reasonable time; Option K (R37, termination): offeree gave consideration to hold open offer; Detrimental reliance; Rejection: words or conduct of the offeree rejecting the offer: Rejection effective when received by the offeror; Conditional acceptance is indirect rejection: kills the K. (2) Acceptance (2-206): Offer may invite or require acceptance by a certain form (R30); Offer may prescribe the place, time, or manner of acceptance but if merely suggests another method is not precluded (R60); Acceptance of offer defined (R50, performance and promise); Option K created where offer invites offeree to accept by rendering performance and does not invite promissory acceptance when the offeree begins the performance (R45, beginning to perform preparing to perform, see R54 about manifestation of intention not to accept); Acceptance is operative as soon as put out of the offerees possession unless an option K and then operative when received by offeror (R63); Acceptance by telephone or teletype (R64); Medium of acceptance is reasonable if it is customary in similar transactions (R65); (a) Unequivocal acceptance: Common law: acceptance of each and every term of the offer (mirror image rule) R59; Additional terms in acceptance (2-207, requires definite and seasonable expression of acceptance) between merchants, become part of the K unless they materially alter the K, the offeror objects, or the offer is limited to its terms (battle of the forms). Different terms in 2-207, majority approach knockout rule (i.e. different terms cancel each other out). Materially alter in 2-207(b) is one result in surprise or hardship. cmt. 4. (b) Methods of acceptance: 2-206(a) in any manner and by any medium reasonable in the circumstances, can apply this to shrinkwrap and clickwrap agreements; Unilateral K: performance: results from an offer which requires completion of performance as an act of acceptance. K only made after performance. Must accept by performing. Cant revoke after performance begins; Bilateral K: promise or performance. (c) Acceptance effective upon dispatch: (mailbox rule but must be properly dispatched, see R66, or received within the time in which a properly dispatched acceptance would normally have arrived, see R67), Revocation is effective only when received by offeror or person authorized by him (R68), (see R49 for Effect of Delay in Communication of Offer). (d) Acceptance by Silence or Exercise of Dominion: (R69, see R70 for late or otherwise defective acceptance). (e) UCC Open Terms: Open Price Term (2-305); Exclusive Dealing & Output Requirements (2-306); Absence of Place for Delivery (2-308, sellers place of business) and Specific Time Provisions (2-309); Open Time for Payment or Running of Credit (2-310, time and place buyer to receive the goods or if not receive documents of title). (3) Consideration (R71 To constitute consideration, a performance or a return promise must be bargained for .) (a) Bargained for exchange (not a gift) (R71), Detriment to promisee or legal benefit to promisor, performance or return promise may be given to or by some other person (R71). (i) Adequacy generally irrelevant (R79); Preexisting duty rule: past consideration is no consideration; Legal duty rule (R73, 74) performance of a legal duty is no consideration; Illusory and Alternative Promise (R77) and Conditional Promise (76): Conditional promise not consideration unless falls under R77 (requires that each alternative performance would have been consideration if it alone had been bargained for or one of the alternatives would have been consideration & substantial possibility that events may eliminate alternatives before promisor exercises his choice). Ks without consideration: promise to pay indebtedness if still enforceable or would be except for the effect of a statute of limitations (R82), to pay indebtedness discharged in bankruptcy (R83), to perform a duty in spite of non-occurrence of a condition (R84), to perform a voidable duty (R85, e.g. minor ratifying upon reaching age of majority), for benefit received (R86), Option K (R87, writing & signed or statute), guaranty (writing & signed or statute, R88), modification of executory K (R89), that reasonably inducing action or forbearance (R90), Unforeseen circumstance rising to the level of impracticability; Modification under UCC (2-209 no consideration needed, see 1-306), (ii) Substitutes for consideration: Promissory Estoppel and detrimental reliance (R90, promise reasonably inducing action or forbearance), and Equitable Estoppel: misstatement of fact and foreseeable reliance upon that misstatement. is prevented - estopped from introducing evidence that that fact is not true. EE is not a basis for a free-standing cause of action, unlike K, negligence, or fraud. See R159, R162When Misrepresentation is Fraudulent or Material). (b) Must be no defenses to formation or enforcement: (i) Mistake (R151): Unilateral Mistake (R153, 154): K is voidable if nonmistaken party knew or should have known mistake; Mistake and Reformation (R155); Mutual Mistake (R152, 154): K is voidable by adversely affected party if: mistake concerns basic assumption on which K was made, mistake has material effect & party seeking avoidance didnt assume the risk; Ambiguous Terms: neither party or one party aware of ambiguity = K, both parties aware of ambiguity = no K. (i) Fraud and misrepresentation (includes concealment and nondisclosure); Illegality of consideration or subject matter; Incapacity: infancy, mental incapacity, intoxication, duress (R174 - physical compulsion, 175 - threat, 176 - threat factors) and undue influence (R177); Misrepresentation (R159): Concealment (R160), When a Non-Disclosure is Equivalent to an Assertion (R161). (c) Statute of Frauds (2-201, R110, remember cannot possibly be performed in one year): certain Ks must be in writing, signed by the party to be charged. When you see the word oral, think about the SOF; Must be a writing signed by the person to be bound; Must meet all material terms test; Exceptions: specially manufactured goods, goods accepted and paid for. What is within the SOF? Within the SOF means we have to meet the requirements. (i) Transfers of an interest within real estate, easements, mineral rights, etc. (exceptions to leases of one year or less); services Ks that are impossible to be finished within one year: arent capable (theoretically possible with unlimited resources) of being performed within a year of time of the K (this time period begins at the time the K is entered into); Ks for sale of goods for $500 or more (Article 2 SOF: only question that must be there is how many/only material term needed institutions where both parties are merchants, special rule for writings signed by def. (2-201); Marriage when marriage is consideration for a promise (if you marry my son, I will buy you a car); Executors and administrators: promises to pay estate debts from own funds; Suretyship: promise to answer for a debt of another. Oral agreement of rescission (R148) & Oral modification (R149). (f) Unconscionable K or Clause (R208, 2-302): (i) Procedural (e.g. hiding some of the terms) & (ii) Substantive (e.g. concerns the actual terms & examines relative fairness of the obligations); e.g. Adhesion K (i.e. all bargaining power on one side & uses power to write K to his advantage). Matter of law (2-302). (g) Effect of Adoption of a Writing: Integrated Agreements (R209-213, 213-216, esp. R214-215), see R211 for Standardized Agreement as Integrated Agreement. (h) Course of Performance, Course of Dealing, and Usage of Trade: (1-303, 2-208, R219-223): Usage of Trade (R222), Course of Dealing (R223), Conditions and Similar Events (R224): Condition Defined (R224), Effects of Non-Occurrence of a Condition(R225), How an Event May be Made a Condition (R226), Preference with regard to conditions (R227), Excuse of a Condition to Avoid Forfeiture (R229).

III. WHAT ARE THE TERMS OF THE K? (1) Rules of K construction: interpretation is the ascertainment of its meaning (R200), in light of all circumstances, as whole (R200), whose meaning prevails (R201), express & specific greater weight (R203), supply omitted essential term (R204), ambiguities against draftsman (R208), in public interest (R207), options regarding unconscionable K or term (R208). Misunderstanding (R20) and Different Meanings (R201). (2) Parol evidence rule (2-202): When parties intend that a writing is the final expression of their bargain, no prior or contemporaneous expression (oral or written) are admissible to vary the terms of the writing; Integrations: final and complete expression: If incomplete (partial integration), evidence admitted to supplement; Merger clause (states agreement is complete on its face) is evidence of full integration; Evidence outside scope of the rule may be admitted: Evidence concerning validity (formation defects, conditions precedent); Evidence used to interpret (words used are uncertain or ambiguous)/evidence showing true consideration paid; Evidence in action for reformation. (3) Article 2 provisions: (a) gap fillers if missing, Article 2 provides: price (reasonable time at delivery), place of delivery (sellers business), time of shipment (reasonable), time for payment (receipt of goods), and assortment (buyers option). (b) Delivery terms and Risk of Loss (2-510, risk on seller until cure or acceptance unless buyer repudiates or breaches with regard to conforming goods): Without fault of either party (2-613, if loss total K is void, if partial buyer has options), commercially reasonable substitute if available must be tendered and accepted (2-614), Sellers Excuses (2-615, seller must notify seasonably when there is a delay), Buyers Procedure on Sellers Notice Claiming Excuse (2-616). Carrier cases: shipment risk passes on delivery to carrier. destination risk passes on tender at destination. (ii)Warranties: Warranty of Title and Against Infringement (2-312); Express Warranties (2-313); Implied Warranties: Merchantable goods (2-314, requirements goods are fit for ordinary purpose, see 2-315 for fitness for a particular purpose), Exclusion or Modification (2-316, e.g. as is, refusal to examine, course of dealing), Conditions of Satisfaction (R228): good faith; Damages difference between goods tendered and as warranted; Cure by Seller (2-508, if time for performance not expired, seller may seasonably notify buyer; if seller thought buyer would accept with or without money, seller may notify & have reasonable time to substitute). FOB (2-319). (4) Modification of terms: Common law: Additional consideration needed/ Written K can be modified orally even if contrary provision: UCC Article 2: No consideration needed so long as in good faith: Must be given in writing if, as modified, K is for $500 or more: Gives effect to provisions prohibiting oral modifications. IV. HAS PERFORMANCE BEEN EXCUSED OR DISCHARGED? (1) Has the condition (precedent, concurrent, or subsequent) been excused?: Hindrance or failure to cooperate; Breach of K; Anticipatory repudiation party unequivocally indicates he will not perform before time of performance; Prospective inability or unwillingness to perform doubt as to partys performance; Substantial performance; Divisibility of K; Waiver (2-209(4)(5)) or estoppel. (2) Has the absolute duty been discharged?: Performance or tender of performance; Occurrence of condition subsequent; Illegality of subject matter after K was made; Impossibility, impracticability, or frustration of purpose (R261-272); Rescission of K; Modification of K; Novation (replacing parties) or substituted K (replacing K); Accord & satisfaction. Event that terminates a duty (R230, see R271 for impracticability). V. HAVE THE TERMS OF THE K BEEN BREACHED? (1) Material/minor breach (common law): minor breach obligee gains the material benefit of bargain so aggrieved (party must perform, but right to damages). Material breach obligee does not gain substantial benefit of bargain so no duty to perform, immediate right to damages and other remedies. (2) Perfect tender rule (UCC Art. 2) if goods or delivery fail to conform to K in any way, buyer generally may reject all, accept all, or accept any commercial units & reject the rest. VI. WHAT REMEDIES ARE AVAILABLE IF THE K HAS BEEN BREACHED?: (1) Purposes of Remedies (R344): to protect a promisees (a) expectation interest, which is his interest in having the benefit of his bargain by being put in as good a position as he would have been in had the K been performed, (b) reliance interest, which is his interest in being reimbursed for loss caused by reliance on the K by being put in as good a position as he would have been in had the K not been made (out-ofpocket costs & opportunity costs), or (c) restitution interest, which is his interest in having restored to him any benefit that he has conferred on the other party (see R345); Punitive Damages (R355): not allowed unless breach is also a tort for which punitive damages are recoverable. (2) Expectation Damages (R347): (a) loss of value to him of the other partys performance caused by its failure or deficiency, plus (b) any other loss, including incidental or consequential loss, caused by the breach, less (c) any cost or other loss that he has avoided by not having to perform; Recovery Limited By: damages that could have been avoided without undue risk, burden or humiliation (R350), unforeseeable result of the breach of K or to avoid disproportionate compensation (R351), damages that cannot be established with reasonable certainty (R352), damages that are based on emotional disturbance unless breach caused by bodily harm or breach is kind that serious emotional disturbance was a particular likely result (R353); Interest (R354): recoverable from time of breach less all deductions for failure to pay definite sum of money or render performance with ascertainable monetary value; Liquidated Damages (R356): damages may be liquidated in the agreement but only at an amount that is reasonable in light of anticipated or actual loss and difficulties of proof of loss. Unreasonably large liquidated damages are unenforceable on public policy grounds. (3) Reliance Damages (R349): If the IPs profit is too uncertain, the IP may ignore the element of profit and has a right to damages based on his reliance interest, including expenditures made in preparation for performance or in performance, less any loss that the party in breach can prove with reasonable certainty the IP would have suffered had the K been performed. (4) Construction Issues (see R348): IP may recover damages based on (a) the diminution in the market price of the property caused by the breach, or (b) the reasonable cost of completing performance or of remedying the defects if that cost is not clearly

disproportionate to the probably loss in value to him. (5) Specific performance (R357-369): SP only if damages would be inadequate (R359, e.g. land and unique goods); Factors Affecting Adequacy of Damages (R360): difficulty of proving damages with reasonable certainty, difficulty of procuring a suitable substitute performance by means of money awarded as damages, and the likelihood that an award of damages could not be collected; SP denied if: uncertain terms (R362), relief would be unfair (R364), compulsion contrary to public policy (R365), burden on court to enforce or supervision is disproportionate to advantages to be gained from enforcement (R366), personal service (R367, see for covenant not to compete), Ks for building construction generally not SP. (6) Restitution (R370-377); unlike reliance damages, restitution is based upon the value of the benefit conferred to the by way of part performance or reliance rather than the cost to the (R370-371). Restitution for Unenforceability (R31[3d]), Illegality (R32[3d]), Incapacity of Recipient (R33[3d]), Mistake or Supervening Change of Circumstances (R34[3d]), Performance of a Disputed Obligation (R35[3d]), and to the Party in Default (R36[3d]). See R237, 240-242 for part performance and the others duties (R241 for material failure). (7) UCC Remedies For Buyer and Seller: (a) UCC assumes good faith; (b) Remedies are cumulative unless reward of one more than remedy would overcompensate; (c) Liquidated Damages (2-718): damages for breach may be liquidated in the agreement but only at an amount which is reasonable in the light of the anticipated or actual harm caused by the breach, difficulties of proof of loss, and inconvenience or nonfeasibility of otherwise obtaining an adequate remedy. Unreasonably large LD is void as a penalty and against public policy; (d) Limitation of Remedy (2719): e.g. to return of goods; (e) Proof of Market Price (2-723, see 2-724): If evidence of the price prevailing at the times or places described in this Article is not available, may use the price prevailing within any reasonable time before or after judgment or under usage of trade would serve as a reasonable substitute; Statute of Limitation (2-725): Four years from the breach, regardless of aggrieved partys lack of knowledge of the breach. Insurable Interest in Goods for buyer and seller (2-501). Anticipated Breach: Right to Adequate Assurance of Performance (2-609), Sellers Remedies on Discovery of Buyers Insolvency (2-702, see 2-705 for seller stopping delivery). Effect of Insolvency (R252) & Failure to give assurance (R251 obligee may demand adequate assurance , may treat obligors failure to provide in a reasonable time as repudiation), & Effect on other partys duties (R253). (8) UCC Buyers Remedies: Perfect Tender Rule (2-601): if goods fail in any respect to conform to the K, buyer may (a) reject the whole, (b) accept the whole, (c) accept any commercial unit and reject the rest; Seller Breaches By (2-711): (a) nonconforming goods (buyer can rightfully reject [2-602] or justifiably revoke [2-608]), (b) fail to tender on time or wrong amount, (c) failure to deliver at all, (d) anticipatory repudiation (2-610, e.g. saying Im not going to deliver before the delivery date, see 2-611 for retraction of AR);; If the goods have not been accepted, the buyers remedies are for: (a) nondelivery, (b)repudiation, (c) rightful rejection, and (d) rightful revocation; If the goods have been accepted (2-714), the buyer may recover damages for any non-conformity of tender (difference at the time and place of acceptance between the value of the goods accepted and the value they would have had if they had been as warranted) but the buyer must give notice within a reasonable time after discovering or should have discovered (2-607(3)); Cancel (2-711) and Cover (2-712): buyer may cancel and recover so much of price that has been paid and cover (cost of cover minus K price plus incidental or consequential damages less expenses saved); OR Damages for nondelivery or repudiation (2-713): market price at time buyer learned of the breach minus the K price plus incidental or consequential damages less expenses saved; Incidental and Consequential Damages (2-715) Incidental: commercially reasonable charges, expenses, or commissions in inspection, receipt, transportation, care and custody of goods rightfully rejected, and in connection with affecting cover, and any other reasonable expense incident to delay or other breach. Consequential: any loss from general or particular requirements at which the seller at the time of King had reason to know and could not reasonably be prevented by cover or injury to person or property proximately resulting from breach (e.g. lost profit from parts to produce good not now produced), cons. dmg. may be limited per 2-719 with some exceptions; Buyers Right to Specific Performance (2-716): where the goods are unique or in other proper circumstances; Deduction of the Damages from the Price (2717). (9) UCC Sellers Remedies: Buyer Breaches By (2-703): (A) wrongful rejection (see 2-602 for rightful rejection), (B) wrongful revocation of acceptance (see 2-602 for justifiable revocation), (C) fails to pay, (D) repudiates (2-610, see 2611 for retraction of AR). Sellers Remedies (2-703): (A) withhold delivery (after a demand for assurances), (B) stop delivery (2-705), (C) proceed under 2-704 (reasonable commercial judgment [e.g. identify and scrap unfinished goods]), (D) re-sell and recover damages under 2-706, (E) recover damages for non-acceptance (2-708, if lost volume seller can recover lost profits under 2-708(2)) OR recover the price (2-709), (F) cancel. Sellers Incidental Damages (2-710): commercially reasonable charges, expenses, or commissions incurred in stopping delivery, transportation, care and custody of goods, and in the return or resale of the goods resulting from the breach (NOTE: no consequential damages for the seller). (9) UCC Breach of Installment K (2-612): (10) Ks for Employment and Mitigation: Limitations on Damages: Avoidability (R350), Unforeseeability (R351), Uncertainty (R352), Emotional Disturbance (R353, normally no), Punitive Damages (R355, normally no), Liquidated Damages (R356, reasonable in light of anticipated or actual loss caused by the breach). At-will employment: public policy exception (e.g. discharged on the basis of race), failure to comply with an employment manual, the duty of good faith. (8) Rescission: K voidable/rescinded if mutual mistake of material fact, unilateral mistake that other party knew or should have known or extreme hardship, misrepresentation of material factor, duress, undue influence, illegality, incapacity, or failure of consideration; (5) Reformation: writing changed to conform to parties original intent if mutual mistake, unilateral mistake & party knows of it & does not disclose, or misrepresentation. VII. DO ANY 3RD PARTIES HAVE RIGHTS OR RESPONSIBILITIES UNDER THE K? (1) Third-party beneficiaries: Only intended beneficiaries have rights under K; Vesting of 3rd partys rights (no modification without 3rd partys consent after vesting) third partys rights are vested if he: Manifested assent; Brought suit to enforce the promise; Materially changed position in justifiable reliance; Promisor can raise against the 3 rd party any defenses he could raise against promise; Third party beneficiary v. promise (if promisor fails to perform): Donee beneficiary may not sue promise unless detrimental reliance; Creditor beneficiary may sue promise on underlying obligation; Third party beneficiary may sue both the promisor & promisee but obtain only one satisfaction. (2) Assignment of rights transfer of rights under K: All K rights are assignable unless assignment materially alters obligors duty or risk or is prohibited by law: K provision prohibiting assignment bars only delegation of duties: Revocability assignments for value are irrevocable (includes preexisting debt); Assignors warranty liability to assignee assignor impliedly warrants: He has made no prior assignment of the right; The right is not subject to limitations or defense other than those disclosed or apparent; He will do nothing to defeat or impair the right; Successive assignments of the same right: Revocable assignments subsequent assignee prevails / Irrevocable assignment first assignee has priority. (3) Delegation of duties transfer of Kual duties: Duties that cant be delegated: Those involving personal judgment or skill; Those involving special trust in delegator (e.g. doctor, lawyer); Those restricted by K; Those the performance of which by a delegate materially changes the obligees expectancy; Liability of parties: Delegator remains liable/Delegate liable if he assumes the duty/Assignment of K or rights under the K construed to include delegation & assumption of duties. time is of the essence; expectation damages (Total Price Cost Saved Paid to Date = Amount Owed; Cost to Date + Profit Paid to Date = Amount Owed); Total Price Total Cost = Profit; Total Price Cost to Date = Cost to Complete; Total Price Paid to Date = Amount Still Owed